What's happening to Apple's share price?

Last night Apple's share price declined to $392.05, wiping 44.16% or $310.05 of the value of each AAPL share since September 2012 (the stock closed at $702.10 on 19 September), and dropping to its lowest level since December 2011. In the first quarter of the year Apple was one of the worst performers of the S&P 500 in what is being described as a crisis among investors.

Last night Apple's share price declined to $392.05, wiping 44.16% or $310.05 of the value of each AAPL share since September 2012 (the stock closed at $702.10 on 19 September), and dropping to its lowest level since December 2011. In the first quarter of the year Apple was one of the worst performers of the S&P 500 in what is being described as a crisis among investors.

This is the first time the stock has fallen below $400 since December 2011, and it has wiped more than $20 billion in shareholder value, according to reports. What happened?

Why is AAPL in decline?

There are a number of potential causes of the decline. A recent report from a chip supplier hinted that Apple may have reduced orders for the iPhone, and that confirmed some fears that the market for the device is in decline. Another potential cause: psychology. A number of shares may have been sold simply because $400 was a trigger than investors were anchored to. Anchoring is a common practice, explains Motley Fool. A lot of people may have anchored to $400 because it made sense to them psychologically.

1) Cirrus Logic preliminarily reported lower-than-expected revenues

Some analysts have speculated that 90% of audio chips from Cirrus Logic were bought by Apple so when the company published terrible projections fears of weakened demand for iPhones and iPads were exacerbated.

Of course, it's feasible that Apple has in fact found a new supplier for the chips.

2) Lowered iPhone sales expectations

Fears that Apple will see fewer iPhone sales are nothing new amid concerns that the iPhone market has reached its peak in the Western world.

A number of analysts have cut their targets for iPhone sales. For example, last week Morgan Stanley cut its iPhone sales forecasts for the quarter from 37 million units to 33 million.

Analysts estimates for how many iPhones Apple sold in the quarter ending in March range from 32.50 million (Shaw Wu, Sterne Agee) to 42.50 million (Michel Contant, The Braeburn Group). In the previous quarter (Sept-Dec) Apple sold 47.8 million iPhones. Read Fortune's complete list of analyst forecasts here.

There are also concerned that PC sales are in rapid decline, following estimates from IDC and Gartner

However, the good news is that Apple may only sell 5% of PCs worldwide, but the company makes 45% of the profits, according to Horace Dediu at Asymco.

He explains: "The real problem for the PC vendors is not that they have such low margins - they've had low margins for decades. It's that the volumes which 'made up for' low margins are disappearing."

3) Falling profit margins

Speaking of falling profit margins. Also causing concern for investors are claims that consumers are purchasing the older, cheaper iPhone models rather than the more expensive iPhone 5. Verizon indicated this in its earnings report released yesterday. The company claimed it sold 4 million iPhones in the quarter, but only half of those were the 4G-equipped iPhone 5.

For investors the concern is that if consumers are choosing older iPhones (and the cheaper iPad mini) Apple will be making less profit. Should Apple launch a low-cost iPhone for emerging markets, profit margins could also become an issue.

According to CNN Money, Apple's gross profit margin fell six percentage points over the year to 38.6%.

Apple will be highlighting its profit margins in its financial results, due out next week. During its January financial announcement the company explained that it was changing the way it provides guidance, including gross margins and operating expenses. The company estimated that its gross margin for this quarter would be between 37.5 percent and 38.5 percent.

It's not only Apple's profit margins that have investors concerned; there is an expectation that earnings will fall short of expectations. It is even considered that Apple may report lower quarterly earnings, something they haven't done in 10 years. There is also concern that revenue growth will be less than usual.

Last quarter, Apple generated profit of $13.1 billion, but that was flat compared with the year-ago period.

In its financial results announcement in January, Apple estimate revenue for this quarter would be between $41 billion and $43 billion. A year ago the company reported quarterly revenue of $39.19 billion.

Among analysts the average estimate is 42.66 billion, ranging from a low of 41.06 billion to a high of 44.18 billion.

On average analysts expect earnings of $10.12 billion ($9.23 – $12 billion). This compares to $11.6 billion a year ago.

The growing competition from Samsung – and Google Android – is another area of concern for investors. However, Apple did account for 69% of the smart phone industry’s profits in 2012, according to Canaccord Genuity analyst T. Michael Walkley. Again, if Apple can maintain high profit levels market share may not matter.

6) Apple has made no 'major' product announcements since October

Some reports suggest that Apple's share price suffers while Apple remains silent about its plans for the future, and the lack of new product announcements may not be helping its cause either.

Apple's last major announcement was the iPad mini in October, although the company did release the 128GB iPad in January and updated the MacBook Pro with Retina Display in February.

There had been rumours that Apple would release an updated iPad in March or April, but this has failed to materialise, leading to suggestions that something is up with Apple's product cycle. However, while last March Apple did launch the third generation iPad, it wasn't until June that other products were launched.

October: iPad mini, 4th generation iPad, Retina 13 MacBook Pro, iMac

September: iPhone 5, iPod touch, iPod nano, iTunes, iOS 6

July: Mountain Lion

June: MacBook Pro with Retina, MacBook Air

March: The New iPad, Apple TV update

7) Trader misbehaviour

There's one other factor that may be at play. As we have noted a number of times over the past few months, small traders need to be aware of the big funds who have the ability to invest or remove large sums of money from AAPL causing massive changes to the value of the stock.

Another recent example of big players causing big changes to Apple's stock include "a very premeditated unloading of some 800K shares (some $350 million worth) of AAPL in the last second [of trading]" on 25 January.

How can Apple recover?

1) Launch a new iPhone

Reports from the Asian supply chain suggest that Apple is gearing up for a June launch of a new iPhone, however, there are also concerns that Apple's flagship device may not be updated until September.

When the new phone launches it needs to compete with the Galaxy S4 and the Android operating system. There are also calls for Apple to offer a low cost phone in a bid to target the new emerging markets of China and India, however, as mentioned above, a low-cost iPhone may negatively affect margins, which is not something that investors want to see.

2) Come up with another revolutionary product

To see continued success, Apple needs a new high-profile, disruptive product. The iPhone's heyday may be over. The company needs to create innovative products with new market potential. There have been suggestions that for Apple is gearing up to launch a TV and a smart watch (iWatch), either of which may give investors new passion for the stock.

The company has lots of cash and investors want to see some of it. However, having $137 billion 'in the bank' doesn't mean that the company can pay out large sums to investors: much of that cash is held off shore and there will be tax implications in bringing it back to the US (69% of Apple’s cash is held overseas). Also, much of the cash is in investments and bonds, and Apple may have plans for more acquisitions like WIFISlam.

However, if it doesn't pay some out soon investors may start to worry about why Apple is being so protective of its cash.